Kamshan Holdings Ltd. v Chan Tung Man

HCA 7959/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.7959 OF 1997

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J U D G M E N T

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This is one of those unfortunate cases where due to some minor misunderstanding the parties ended up pitted against each other in court. At the end of trial, by consent judgment was reserved pending written final submissions. The last submission was in on 15th April 1999. Here is my judgment.

2. The Plaintiff company was the registered owner of the building situate and known as No. 922 Canton Road, Kowloon ("the Building"). It has sold its interests in the Building. The Plaintiff company is basically a company controlled by a CHAN family. The head of the family is an elderly gentleman called CHAN Shing-hee ("Mr. CHAN senior"). Mr. CHAN senior was the developer of the Building. He remained the owner of the Building until late 1995 when the Building was sold subject to existing tenancies to the Plaintiff company managed by his children.

3. On or soon after completion of the Building, the Ground floor together with the Mezzanine Floor as one unit of the Building ("the First Premises") were let by Mr. CHAN senior as landlord to the Defendant. That was about 35 years ago. Some time after that, the First Floor of the Building ("the Second Premises") was also let by Mr. CHAN senior to the Defendant. Evidence conflict as to whether the Second Premises were let in mint condition to the Defendant but it is not disputed that the Defendant had been a tenant of the Second Premises for at least 20 years before he moved out of the Building in March 1997.

4. The letting of the First Premises and the Second Premises were renewed periodically without interruption. After the Plaintiff became the registered owner of the Building and thus the landlord by assignment of the Defendant, in August 1996, the Plaintiff duly served notice to quit on the Defendant in respect of both the First Premises and the Second Premises. It is common ground that the Defendant moved out of the Building and surrendered the keys to the Plaintiff on 22 March 1997.

5. On 22 March 1997, Mr. CHAN senior and one of his sons Mr. CHAN Ka-cheong (Mr. CHAN junior) both on behalf of the Plaintiff went to inspect the First Premises and the Second Premises. Then they joined up with the Defendant for formal hand over of the keys as symbolic delivery of vacant possession back to the Plaintiff. A crude hand-over note in Chinese was signed. This noted has been admitted into evidence. There are two certified translations of this note. In my view, and I am supposed to be conversant with both the Chinese and the English language, the differences in translation are insignificant. One version reads:-

"Canton Road No.922, Ground Floor together with Cock Loft/Mezzanial Floor and Second Floor on 14-3-97 vacated, Landlord agrees to repossess

Chan Tung Man 3 Keys

Landlord's signature: Chan Ka Cheong

Tenant's signature: illegible"

6. Evidence from both sides confirm that neither Mr. CHAN made any complaint to or demand on the Defendant regarding the state or conditions of the First Premises and the Second Premises. In fact there is evidence, which is not contradicted, that Mr. CHAN senior asked the Defendant to help with showing prospective buyers or tenants to the premises.

7. Throughout the period when the Defendant was the tenant at the First Premises and the Second Premises, he conducted a business selling plumbing accessories using the Ground Floor as the shop front and storing his stock on all three levels he rented. To maximize or optimize use of space and to suit the operations of his business, the Defendant made a number of alterations and additions on all three levels. The Plaintiff has produced as evidence an expert report ("the Report") and called the author of that report, a chartered building surveyor called Mr. K.K. Lo. There is no serious challenge to the observations in the Report. Essentially, Mr. Lo noted in the Report that the Defendant had

(1) constructed a large number of standing and hanging metal racks for storing hoses and pipes; these racks were affixed to the floor, wall or ceiling for support;

(2) converted all but one toilet on all three levels to make them suitable for use as store rooms; the kitchen in the Second Premises was also converted for the same purpose;

(3) constructed a large metal cage balcony (cockloft) at the Mezzanine Floor above the shop front;

(4) the internal concrete staircase leading from the Ground Floor to the Mezzanine Floor completely removed to create space;

(5) a number of internal doors removed;

(6) the parapet wall along the outer edge of the Mezzanine Floor taken down;

(7) built an metal extension to the back of the Mezzanine Floor for extra storage space;

(8) created an opening and installed there a pair of metal doors in the external wall of the balcony of the Second Premises; in addition a steel hoisting beam was fixed to the ceiling beams in the Second Premises for lifting goods from street level into the Second Premises through the said opening; and

(9) left rubbish, junk and debris in the First Premises and the Second Premises.

There is no suggestion that any of the said conversions or alterations contravene any building regulation. But by all accounts the Second Premises is a residential unit and the conversion of those premises into a kind of store house cannot be right.

8. With the evidence as aforesaid, I turn to the bases of the claim and that of the defence. According to the Amended Statement of Claim, the Plaintiff avers:-

(1) Breach of Clause 4 of the respective tenancy agreement for the First Premises and the Second Premises in that the Defendant failed to remove all those furniture and fittings in the premises. (Paragraphs 4 and 5).

(2) Breach of implied obligation not to commit any waste of the First Premises and the Second Premises as particularized and summarized in Paragraph 7 above. (Paragraphs 6 and 7).

(3) Breach of implied obligation to use the First Premises and the Second Premises in a tenant-like manner and to deliver up possession of the premises at termination of tenancy in the same condition as when the Defendant took them. (Paragraphs 8 to 11 inclusive).

(4) For all the breaches, the Plaintiff claims the costs of re-instatement and loss of rent. (Paragraphs 12 and 13).

9. According to the Amended Defence, contractual obligation to remove all furniture and fittings under Clause 4 of the respective tenancy agreement is denied. Implied obligation not to commit any waste is not denied but the Defendant avers that the state of the premises complained of was the result of reasonable and proper use of the premises. The Defendant admits an obligation to use the premises in a tenant-like manner but denies the obligation to deliver up the premises in the conditions as he first took them. It is also contended on behalf of the Defendant that even if there is an obligation to deliver the premises in the conditions as the Defendant took them, since the Plaintiff purchased the First Premises and the Second Premises in late 1995 at which point in time the premises were already in the state as they were found in 1997, the obligation to deliver the premises in the same conditions has been complied with.

10. The relevant clauses in the identical tenancy agreements are:-

"Both parties agreed to make all the terms and conditions as follows and each is willing to observe (them):-

(4) When Party B moves out, he shall remove all the furniture during the term of tenancy in order to complete the procedure. In case Party B does not return the key to the door on any excuse, or leaves behind old and broken trunks and cabinets etc. Without taking them away in order to intentionally cause delay in time, then Party B will be regarded as having abandoned his rights if he fails to remove the items left three days after he has vacated the premises. Party A is entitled to sell these items in the presence of one or two witnesses without going through the police station or tenancy tribunal and to rent (the premises) to others. The proceeds from the sale will be used to pay up the rent in arrears. If there is still any deficiency, Party B shall make up for the same without dispute.

(7) The decorations and partitions inlaid to walls, window guards, electrical installation etc. put up by Party B on taking up possession may not be dismantled when Party B vacates the premises in order to maintain its original complete state. Party B may dismantle such inters only on the consent of Party A, but the premises shall nevertheless be restored to its complete state."

Breach of Clause 4

11. Although the Plaintiff claims that the Defendant should remove all furniture and fittings under Clause 4 of the tenancy agreements, the wording of that Clause covers furniture only. I do not think it is fair to read into the Clause things unprovided for.

12. The Report does not refer to any furniture. The only furniture left behind by the Defendant are several self-standing steel filing cabinets shown in one of the photographs in the Report. The numerous metal racks, being affixed to the wall, the floor or the ceiling, cannot properly be regarded as furniture. The racks are fixtures. It is trite law that a tenant may not remove fixtures. In short, the Defendant breached Clause 4 in not removing the steel filing cabinets.

Breach of Implied Obligation not to commit...